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For purposes of Form 8027, the customer for whom a work site employee performs services (that is, the employer who operates a large food or beverage establishment) is considered the employer and must file Form 8027. The CPEO must furnish to the customer any information necessary to complete this form.
Generally, you must report the full amount contained in box 8 of your Form W-2. However, you dont report the entire allocated tip amount on your income tax return if you have adequate records to show that you received less tips in the year than the allocated amount.
Allocating Tips These allocated tips are computed and reported on Form 8027. Employers show allocated tips on the employees Form W-2 in the box 8 titled Allocated tips. No income tax, social security or Medicare taxes are withheld on allocated tips.
Therefore, the amount of the penalty is $500 ($5,000 0.10 = $500). (iv) Example 4. Form 8027, Employers Annual Information Return of Tip Income and Allocated Tips, requires certain large food and beverage establishments to report certain information with respect to tips.